Nvidia shares climbed 7.9% to close at $185.41 on Friday, spearheading a broad rally across the semiconductor sector. The surge followed Amazon's announcement of a planned $200 billion capital expenditure budget for 2026, which investors interpreted as a significant tailwind for AI hardware suppliers.
Semiconductor Sector Rallies
The PHLX Semiconductor Index advanced 5.7%, with notable gains from peers Advanced Micro Devices, up 8.3%, and Broadcom, which rose 7.1%. The rally contributed to the Dow Jones Industrial Average crossing the 50,000 mark during the session.
Market analysts noted the trade has exhibited volatility, with this week's rebound reflecting genuine underlying demand for artificial intelligence products following a recent selloff. Nvidia CEO Jensen Huang stated AI demand is "going through the roof," suggesting the technology is approaching an inflection point.
Big Tech Spending Drives Optimism
Amazon's substantial capital expenditure target—which focuses on long-term assets like data centers, servers, and networking equipment—directly benefits companies like Nvidia that supply these components. Industry estimates suggest Amazon, Meta, Microsoft, and Alphabet could collectively spend approximately $650 billion in 2026.
While increased spending from major customers suggests a robust order pipeline, the market remains sensitive to any signs of uncertainty, including project delays, rollout lags, or shifting corporate priorities. The AI investment theme is crowded and moves rapidly, with any hesitation quickly noticed by traders.
Supply Constraints and Shifting Focus
Reports indicate Nvidia is prioritizing AI chip production over gaming GPU updates due to ongoing memory supply constraints. This supply tightness keeps investor attention on manufacturing capacity limits and the evolving balance between data center and consumer gaming demand.
The same capital expenditure wave now fueling optimism recently unsettled investors concerned about whether cloud and software firms can generate sufficient returns from these massive investments. Should skepticism about profitability reemerge, semiconductor stocks could face selling pressure despite current strong demand.
Next Catalyst: February 25 Earnings
All eyes now turn to Nvidia's quarterly results scheduled for February 25. Investors will scrutinize whether customer budget discussions are converting into firm purchase orders and seek updates on supply chain dynamics, pricing trends, and upcoming product developments. The report will set the tone for the sector heading into March.
